Owner Occupied vs. Investment Property Loans

There are different loan programs available depending on the type of property you are looking to buy or refinance. Qualifying standards differ between homeowner occupied homes and investment properties. Since these qualifications can change with market fluctuations, it is important to speak with a qualified mortgage professional to be aware of current standard guidelines on mortgaged properties and compare the difference between owner occupied vs. investment property loans.

Residential Investment Properties

Residential Investment loans were created to help make housing available in your community. These loans are typically for properties with four units or less. Qualifying for these loans is very similar to getting a traditional mortgage for your primary residence. But, since there’s an assumption that at least some portion of the property will be rented, the way income is determined is slightly different and will vary from lender to lender.

It isn’t necessary to have experience as a landlord to qualify for these loans. Most lenders will apply 70 to 80% of your assumed rental income towards your qualifying.

Lenders tend to find investment properties to be a more risky investment, so these loans will usually have a higher interest rate than your traditional home loan for a primary residence.

Owner Occupied Loans

Loans for properties that will be owner-occupied offer a lot more flexibility than investment loans. Under the right circumstances, you can qualify for an extremely low down payment or none at all. This is almost never true for an investment property. Additionally, since lenders have found primary residences to historically be at lower risk of default, interest rates can be significantly lower than they are for investment properties.

Since costs for the borrower are lower for non-investment properties, some buyers find that it is easier and cheaper to purchase a home to live in and later convert it to an investment property. By doing this, you can get the savings from a lower interest rate, save money with a smaller down payment, and can still make rental income on a property. Of course, doing this requires the buyer to move, but, given the savings, it can be very beneficial for those looking to get into the rental market who don’t have a lot of cash upfront.

To see if you qualify for an FHA 203k Renovation Loan, fill out our quick 1-minute form to have a Mortgage Advisor contact you.

MortgageAdvisor.com (the "Site") is a website owned and operated by Best Rate Holdings, LLC dba Best Rate Referrals ("Best Rate Referrals"). Best Rate Referrals is an online lead generator and a Duly Licensed Mortgage Broker as required by law, with its main office located at 4800 140th Ave N., Suite 101 Clearwater, FL 33762, Telephone Number (866) 984-1240. NMLS Consumer Access NMLS ID # - #1521515 - Best Rate Holdings, LLC. Best Rate Referrals provides administrative and marketplace services by matching consumers who are prospective borrowers with one or more banks and/or lenders (each a "Lender") that offer products and/or services of interest. Best Rate Referrals is not a Lender and does not: originate, make or refinance loans; make credit decisions in connection with loans; issue loan commitments or lock-in agreements; or guarantee that your submission of information on the Site will result in the origination or refinancing of a loan from a Lender.

In order to be matched with participating Lender(s), Best Rate Referrals may require you to submit certain personal and financial information. Your responses, and the information you choose to submit in order to be matched with participating Lender(s), will help improve the accuracy of your results. The information you submit to Best Rate Referrals is not a loan application. You understand, acknowledge and agree that the information you choose to provide to Best Rate Referrals will be collected, stored and transmitted only to Best Rate Referrals’ partners, and solely for the purpose of matching you with participating Lenders that can provide you with more information about their respective products and/or services. Make sure to compare rates and fees, as they can vary between Lenders and may depend on the state in which you reside.